Nikita Pillay – Employment equity audits and compliance


Do you have 50 or more employees in your company? Or is your company’s annual turnover higher than Schedule 4 of the Employment Equity Act? If so, then you are labelled a ‘designated employer’. And with that label comes a lot of legal responsibilities, the most important of which is to comply fully with the Employment Equity Act. If you don’t comply with it completely, then you’ll face serious non-compliance penalties, alongside costly legal procedures for you and your business.
The employer will be subject to a fine, the greater of R1 500 000 or ranging between 2% and 10% of the employer’s turnover. The fine increases depending on the repetition of the contravention. In addition, companies that falsely reported on employment equity plans while not having such plans in place, will be criminally prosecuted.

In August 2017, the Department of Labour announced a crackdown on companies to ensure that they comply with the act. At the time the department said six JSE-listed companies had been found to be non-compliant and were referred for prosecution, since then the Department of Labour is prosecuting 44 companies for breaking Affirmative Action laws, five of these companies have paid fines, while the rest of the companies are facing fines of R1.5 million each. So, the message is clear: You must comply with the Employment Equity Act!

Section 20(1) of the Employment Equity Act requires a designated employer to prepare an employment equity plan which will achieve reasonable progress towards employment equity in that employer’s workforce. This employment equity plan must include the affirmative action measures to be implemented, the procedures used to monitor and evaluate the implementation of the plan, the timetable setting out the plan, objectives, duration, procedures and internal management of disputes regarding the plan and the numerical goals to be achieved of the appointment of underrepresented persons from designated groups (“black people, women and people with disabilities”) in order to achieve equality in the workplace.

Steps ensuring employment equity (EE) compliance
STEP 1: Appoint an EE manager and form an EE committee
STEP 2: Educate and train staff on their role and responsibility as committee members
STEP 3: Conduct a workplace analysis with income differential statements
STEP 4: Conduct an internal audit on the barriers and affirmative action
STEP 5: Discuss and plan goals and target for the next five years
STEP 6: Develop an EE plan in relation to compliance if there is a deviation from the norm
STEP 7: Structure the EE plan to accommodate for the goals and targets to be reached
STEP 8: Engage in a meaningful consultation process with the committee to ensure agree
STEP 9: Verify and document statistics for reporting
STEP 10: Submit an annual EEA2 and EEA4 report to the Department of Labour – signed off by the EE manager and the CEO

Important sections of compliance
a) Consult with employees as required by section 16
b) Conduct an analysis as required by section 19
c) Prepare an employment equity plan as required by section 20
d) Implement its employment equity plan
e) Submit an annual report as required by section 21
f) Publish its report as required by section 22
g) Prepare a successive employment equity plan as required by section 23
h) Assign responsibility to one or more senior managers as required by section 24
i) Inform its employees as required by section 25
j) Keep records as required by section 26.

If the Department of Labour inspects your company, you will need to show the inspector the following things.

An Employment Equity File, containing:
• Your company’s current EE plan, signed by CEO
• Copies of previous plans
• Records showing how plan has been communicated
• Evidence of EE committee nominations, acceptance and the process followed
• Evidence of the appointment of an EE manager with a signed letter of responsibility
• List of EE committee members
• EE committee’s constitution with a code of conduct, signed by all members
• Minutes of EE bi-annual/ quarterly meetings
• Copies of all EEA2 and EEA4 annual reports submitted along with acknowledgement of submission letters.
• EE related complaints and records of actions taken
• Qualitative analysis of the workforce
• Workplace profile and numerical goals and targets, as well as previous reports
• Latest workplace skills plan and training report

The Department of Labour inspectors can also interview committee members and ask them to explain the committee’s role.

In the third quarter of 2019, the Department of Labour had given another challenge to designated employers within the employment equity sphere. The format of the old EEA4 report was repealed and replaced with a newer version right before the submission period opened for the 2019 employment equity reports.

As South African Labour Law is persistently changing, employers are becoming increasingly perplexed as to what information the Department of Labour required, and how they will use this information to improve transformation within South Africa. The following changes have been gazetted in terms of the EEA4 report:
The EEA4 – Income differential statement requests very detailed information from designated employers, such as fixed, guaranteed, variable annualised salaries, average annual pay for the top, bottom and mid 10% of an organisation’s workforce. The report further requests for a policy which addresses and aims to close the vertical gap between the highest and lowest paid employees, and needs to be aligned with the organisation’s remuneration policy.
This challenges employers to take a more in-depth approach to ‘’equal pay for work of equal value’’ to minimize the remuneration gap as well as looking at importance of job evaluation, job grading and benchmarking.

Annual Reporting
The Department of Labour online reporting portal opens on 1 September and closes on the 15 January each year.
The Department of Labour head office will schedule national advocacy events during September every year to coincide with the commencement of the report date.
Employment equity announcements in the press will aim to raise awareness and thus ensuring high levels of compliance. There will also be national events to coincide with the launch of new regulations, codes of good practice, the public registry, and reports by the Commission for Employment Equity.
Employment equity will always be a constant in building sustainable work environments. It is important that it is taken seriously and not as a compliance ‘’tick box exercise’’.

Nikita Pillay T: +27 (0)31 767 0625 W: